Don’t panic on oil

Monday

Mar 14, 2011 at 12:01 AM

Whenever the price of oil hits the $100 per barrel mark and gasoline nears $4 a gallon, two things are sure to happen: Politicians start calling upon the president to tap the Strategic Petroleum Reserve, and Republicans in Congress demand that vast expanses of American coastlines and the Arctic be opened to oil and natural gas drilling.

Both are bad ideas that would do little to reverse long-term trends on oil prices and supply. The Obama administration should resist these calls and continue its push for a future energy policy that focuses on conservation and development of renewable energy. There will come a time when this nation needs to open the reserve and significantly expand drilling, but that time hasn’t arrived yet.

First, the reserve: Members of Congress want Obama to sell oil from the reserve to help stabilize gas prices, which are spiking as fighting disrupts production in Libya. The idea is that opening the reserve would add supply to the domestic oil market and push down prices.

The reserve, which is stored in four salt domes in Texas and Louisiana, was established by Congress 36 years ago in response to the 1973 Arab oil embargo. The government-owned emergency supply now totals 727 million barrels, just under three-quarters of its estimated capacity.

Presidents, for the most part, have been reluctant to siphon the reserve and have done so only in response to natural disasters such as hurricanes Katrina in 2005 and Gustav and Ike in 2008, and wars such as Operation Desert Storm in 1991. There have been a few ill-advised exceptions, including President Clinton’s politically opportunistic use of 30 million gallons before the 2000 presidential election. But for the most part, presidents have followed the 1975 law limiting use of the reserve to “severe energy supply interruption.”

Yes, there is a civil war raging in Libya that has interrupted production from that country’s immense reserves. But oil prices already were on a steady rise before the upheaval began in Libya and elsewhere in the Middle East earlier this year. That’s largely because of increased demand in India and China, countries whose voracious appetites for oil are not going to diminish any time in the foreseeable future. Gas prices will continue to rise, even after the crisis in Libya is resolved.

So far there has been no disruption in the Middle East significant enough to justify opening the reserve. Global supplies remain steady, as Saudi Arabia and other oil-producing countries ramp up production to make up for Libya’s shutdown. There is no oil shortage in the United States, and prices remain well below 2008 levels.

A decision to open the reserve now would release oil that the United States may dearly need at a later date. It could also have the unintended consequence of causing panic on the oil market by signaling that the White House believes the Middle East crisis is worsening.

Second, the calls for expanded drilling: Once again, we rise wearily to point out that a country that consumes a fourth of the world’s oil but owns only 2 percent of its known reserves cannot drill its way to self sufficiency.

Big Oil is sitting on millions of acres of federal land that they could be using to drill for oil — there are approximately 70 million acres of federal land leased but sitting idle. In the Arctic region of Alaska, more than 90 million acres, onshore and offshore, are open to leasing yet only a fraction are being used.

Republicans, who remain fixated on opening the Arctic National Wildlife Refuge to drilling, point out that there is between 5.6 billion and 16 billion barrels of oil beneath the refuge’s coastal plain. Under the most optimistic scenarios, production from the refuge would result in a 0.5 percent annual increase in domestic supply, which would hardly make a dent in this nation’s dependence on foreign oil. At best, the refuge would yield a year’s supply of oil for the United States, and it would take a decade before the first drop of oil hit the pumps.

The Obama administration and Congress should focus their energies on developing an energy policy that emphasizes efficiency and alternative energy sources. Eventually there will come a time for expanded drilling and opening the strategic reserve, but that time hasn’t arrived yet.

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